• filter:

using flat rate tax in paypal checkout

  • Page :
  • 1
  • Text Only
  • Search this Topic »
Voting History
rated:
I am looking into using Paypal express checkout for my small website as a payment method. my question is, can i use a flat tax rate for all customer transactions legally. so basically behind the scene i will get the correct tax rate for each transaction while filing taxes and that means, for some transactions i might have to pay tax from my own pocket.

The reason i cannot charge the exact tax in paypal is that Paypal express checkout doesn't allow the amount to change (based on based on paypal customer shipping address) after they logon and confirm the payment....so that's why i have to pass/charge an estimated flat rate tax rate amount to the original shopping cart total.

Coming to my question, can i use flat rate tax on my web site legally for all transaction and for all customers in any US state? and/or whats the best way to handle it ....if someone has another idea.

Note: i don't want user to create profile on my website and store address and also i want to stick with paypal for now. i simply want to use paypal confirmed address.
 

Member Summary
Staff Summary
Thanks for visiting FatWallet.com. Join for free to remove this ad.

rated:
You cannot tell someone you are charging X% "for tax" and then pay less than X to the government. Paying more is just fine. Seeing as how some places have no sales tax any flat rate above 0% isn't going to work. You cannot bill someone in Oregon for any amount of something you call "sales tax".

You can build it into your pricing other ways and tell the user "all taxes and fees included in price" though. You just cannot tell the customer I'm charging x% "for tax" though.

rated:
mk1039 said:   I am looking into using Paypal express checkout for my small website as a payment method. my question is, can i use a flat tax rate for all customer transactions legally. so basically behind the scene i will get the correct tax rate for each transaction while filing taxes and that means, for some transactions i might have to pay tax from my own pocket.

The reason i cannot charge the exact tax in paypal is that Paypal express checkout doesn't allow the amount to change (based on based on paypal customer shipping address) after they logon and confirm the payment....so that's why i have to pass/charge an estimated flat rate tax rate amount to the original shopping cart total.

Coming to my question, can i use flat rate tax on my web site legally for all transaction and for all customers in any US state? and/or whats the best way to handle it ....if someone has another idea.

Note: i don't want user to create profile on my website and store address and also i want to stick with paypal for now. i simply want to use paypal confirmed address.

Basically - no.  You can do anything you want, but it would be wrong and could cause you problems not only with your customers, but PayPal and the tax collection agencies.
Will you actually be required to collect sales taxes in any state other than your own (assuming you're required to collect there)?  Generally speaking, if you don't have a physical presence in a state, you're not required to collect and remit their sales tax.  There is a push in many states for "remote seller nexus", but that likely won't affect you.
If you are required to collect tax, then you need a mechanism to collect the correct amount of tax due.  If you collect too much, most states require you to remit all you collect.  Not to mention, the customer may allege fraud if you collect 10% and the rate should be 7%.  No one will mind if you collect 7% and have to remit 10%, but they will complain for the opposite.  There are software packages that can compute the amount of sales tax due based on the buyer's address, but it might be too expensive for your operation.
Instead of collecting a flat-rate tax, you might be better served by increasing your price by that flat-rate and not add any amount designated as tax.  Then you can remit the proper amount due to the taxing authority without over-collection issues.
Kudos for wanting to do the right thing.
   

rated:
fourchar said:   You cannot tell someone you are charging X% "for tax" and then pay less than X to the government.

My recollection is that the Michigan sales tax return has you calculate your tax due, then has an item for tax you collected above the amount due (so you can turn over the excess). Ive never had to use it, so I'm not sure if thats intended to work on a per-transaction basis or in aggregate (allowing you to over collect some customers, and under collect others).

rated:
If you charge tax in a non taxable area, expect a Paypal complaint to be opened.

Why not just 'include' that tax in the item and don't bother charging any tax to the customer and you pay the government what they are owed?

rated:
Just raise the price and say that the price includes any applicable sales tax. Then it's on you to properly account for the sales tax.

rated:
Per this : "Express Checkout merchants must calculate and pass sales tax to PayPal."

Sounds like there's a way to pass it into the API call somehow, which means you have to use another way to determine taxes. I'm sure there are free tax tables available for your state, which you could hard-code, or maybe there's even a web-based query per zip code. I haven't done Express Checkout, only used the cart with "add to cart" buttons. That API allows paypal to calculate the sales tax based on the cart total, but only after you've manually entered all the tax rates by state or zip code into your profile, which is really stupid.

I believe you may use a flat tax rate as long as the amount you collect is equal to the amount you submit to the state. I believe this because I've seen it quite frequently online, but it could also be because there's no easy or cheap way to properly calculate the tax. However, it's probably best to charge the lowest state-wide rate, because charging more will make for unhappy customers. In CA, there is a way to get overpaid sales tax back from the state, but I'm pretty sure nobody actually does it, because the money doesn't justify the time needed (unless you bought a car in another county or city and they, wrongly, calculated the sales tax based on their location instead of your home).

rated:
mk1039 said:   Coming to my question, can i use flat rate tax on my web site legally for all transaction and for all customers in any US state? and/or whats the best way to handle it ....if someone has another idea.
  You would only collect sales tax from customers in your own state, and even then, unless you have a B&M store, why bother for a small online business?

rated:
atikovi said:   mk1039 said:   Coming to my question, can i use flat rate tax on my web site legally for all transaction and for all customers in any US state? and/or whats the best way to handle it ....if someone has another idea.You would only collect sales tax from customers in your own state, and even then, unless you have a B&M store, why bother for a small online business?It being state law is one reason.

rated:
stanolshefski said:   Just raise the price and say that the price includes any applicable sales tax. Then it's on you to properly account for the sales tax.
  Just confirm your state doesn't require the sales tax to be broken out on invoices.  "We'll pay the sales tax" promos are common, but invoices typically show the tax then a discount - I don't know if that's retailer choice, or a required formality.  A quick call to the state should get the answer.

Otherwise, that is the simplest solution.  Except that your list prices will now be higher than competitors, despite the out-the-door prices remaining competitive (except for out of state customers).

rated:
scripta said:   atikovi said:   mk1039 said:   Coming to my question, can i use flat rate tax on my web site legally for all transaction and for all customers in any US state? and/or whats the best way to handle it ....if someone has another idea.You would only collect sales tax from customers in your own state, and even then, unless you have a B&M store, why bother for a small online business?It being state law is one reason.
When you file the state income tax return (assuming there is one), the revenue office is going to cross reference Schedule C filings with retail sales to sales tax.

rated:
OP has a small internet business. Revenue office has bigger fish to fry than someone making a few hundred bucks online. Kind of like the neighborhood garage sales. Does anyone actually collect sales tax there? Does anyone selling their knicknacks on eBay report those sales? Craigslist too?

rated:
atikovi said:   OP has a small internet business. Revenue office has bigger fish to fry than someone making a few hundred bucks online. Kind of like the neighborhood garage sales. Does anyone actually collect sales tax there? Does anyone selling their knicknacks on eBay report those sales? Craigslist too?
  The real question is if the OP looks good in stripes... because a web-based business intentionally evading sales taxes is very different than a yard sale or a seller selling personal items on e Bay, CL, etc.. In a yard sale it is assumed the items being sold were owned for personal use, and almost always are being sold for less than they were purchased for (which means no capital gains taxes fro IRS), and most states have a "casual sales" exemption for sales taxes to cover irregular personal sales. If someone has a resale business on the web (or in regular sales in a physical location), then they are a business, and are required to collect taxes where required. 

rated:
atikovi said:   OP has a small internet business. Revenue office has bigger fish to fry than someone making a few hundred bucks online. Kind of like the neighborhood garage sales. Does anyone actually collect sales tax there? Does anyone selling their knicknacks on eBay report those sales? Craigslist too?
1) Some states are now chasing after people even very small marginal tax revenue.
2) OP never said how much business he/she was doing.

rated:
OP's question was about COLLECTING sales tax, not paying it.

rated:
atikovi said:   OP's question was about COLLECTING sales tax, not paying it.
  And you are suggesting OP should just willfully violate the law and not bother collecting it or remitting it to the state because OP's business does not do a lot of volume -- an approach the OP will likely find to be a not particularly compelling defense when the state sales tax folks come knocking. 

rated:
Not suggesting, just mentioning that OP is making more of this than he has to with all the different tax rates he mentioned, when he would only have to collect the tax in his own state. Until he comes back with more details on his operation, any suggestions are just speculation.

rated:
atikovi said:   Not suggesting, just mentioning that OP is making more of this than he has to with all the different tax rates he mentioned, when he would only have to collect the tax in his own state. Until he comes back with more details on his operation, any suggestions are just speculation.
  Some states (i.e. Illinois) have many different sales tax rates due to varying local sales tax rates that you must collect if you have a nexus anywhere in the state.

  • Quick Reply:  Have something quick to contribute? Just reply below and you're done! hide Quick Reply
     
    Click here for full-featured reply.


Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2017